KKR-backed Panasonic Healthcare agreed on Wednesday to buy Bayer Diabetes Care for €1 billion ($1.1 billion) in a rare example of a foreign private equity group and a Japanese company jointly making a large overseas acquisition.
The deal illustrates the global ambitions of Japanese companies, which are increasingly accessing cheap domestic financing to snap up overseas assets.
Bayer Diabetes Care, a unit of German pharmaceutical giant Bayer, provides blood glucose monitoring systems to people with diabetes and healthcare professionals. Both companies had already been in partnership, with Bayer Diabetes Care marketing and selling Panasonic Healthcare products around the world for more than two decades.
Bayer Diabetes Care generated sales of €909 million in 2014.
Panasonic Healthcare is 80% owned by American private equity firm KKR and the remaining 20% is owned by Japanese electronics group Panasonic Corp, which partnered with KKR in 2014 to help it to scale up globally.
“Since first taking steps to becoming an independent healthcare company from Panasonic Corporation through KKR’s investment, it has been our key management objective to form strong partnerships with strategically pivotal companies,” Kenji Yamane, president of Panasonic Healthcare, said in a release.
The integration of Bayer’s global sales network and Panasonic Healthcare’s production capabilities is expected to help Panasonic Healthcare reach global consumers at a time when there are a rising number of people afflicted with the disease.
According to the World Health Organization, nearly 350 million people live with diabetes globally, up from an estimated 30 million in 1985. The rate of diagnosis is expected to rise, particularly in low- and middle-income countries.
The industry is also going through a transition with many healthcare providers putting in place price reductions for diabetes care products. That has resulted in more diabetes care products being sold at lower prices.
Panasonic Healthcare expects to close the transaction in the first quarter of 2016, subject to customary closing conditions, including relevant antitrust clearance.
Healthcare expertise
KKR, led by Henry Kravis and George Roberts, has been investing in healthcare companies for more than 25 years and its investments have ranged from hospitals and pharmacies to medical devices and pharmaceutical drugs across Asia-Pacific, Europe, and North America.
Since 1976 KKR has invested about $10 billion of equity capital including both minority investments and buyouts in healthcare.
KKR has also had a history of buying into spin-offs. Within the Asia Pacific region alone, it invested in Avago, which was spun off from Agilent Technologies and Oriental Brewery, which in turn was spun off from Anheuser-Busch InBev.
In Japan it bought into Panasonic Healthcare, which was spun off from Panasonic and Pioneer DJ's equipment business, which was spun off from Pioneer.
Bank of America Merrill Lynch and Morgan Stanley advised Panasonic Healthcare and Credit Suisse advised Bayer.
